Social Cybernetics: Reflexivity and Social Change

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Social Cybernetics Reflexivity and Social Change

• Stuart A. Umpleby
• The George Washington University
• Washington, DC
• www.gwu.edu/umpleby

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Reflexivity
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Observation
Self-awareness
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Reflexivity in a social system
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What is reflexivity and why is it important?

• Definitions
• As context, the informal fallacies
• Descriptions of three reflexive theories
• Heinz von Foerster
• Vladimir Lefebvre
• George Soros

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Definitions

• reflection the return of light or sound waves
  from a surface the action of bending or folding
  back an idea or opinion made as a result of
  meditation
• reflexive -- a relation that exists between an
  entity and itself
• self-reference such statements lead to
  paradox, a form of logical inconsistency  

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The informal fallacies

• 1. Fallacies of presumption which are concerned
  with errors in thought circular reasoning,
  circular causality
• 2. Fallacies of relevance which raise emotional
  considerations the ad hominem fallacy,
  including the observer
• 3. Fallacies of ambiguity which involve problems
  with language levels of analysis, self-reference

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Cybernetics and the informal fallacies

• Cybernetics violates all three informal fallacies
• It does not sound right. People conclude it
  cannot be right
• But the informal fallacies are just rules of
  thumb

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A decision is required

• Should traditions concerning the FORM of
  arguments limit the SCOPE of science?
• Or, should the subject matter of science be
  guided by curiosity and the desire to construct
  explanations of phenomena?
• Cyberneticians have chosen to study certain
  phenomena, even if they need to use
  unconventional ideas and methods

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Three reflexive theories

• Heinz von Foerster Include the observer in the
  domain of science (1974)
• Vladimir Lefebvre Reflect on the ethical system
  one is using (1982)
• George Soros Individuals are actors as well as
  observers of economic and political systems (1987)

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Von Foersters reflexive theory

• The observer should be included within the domain
  of science
• A theory of biology should be able to explain the
  existence of theories of biology
• Reality is a personal construct
• Individuals bear ethical responsibility not only
  for their actions but also for the world as they
  perceive it

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First and second ethical systems

• If there is a conflict between means and ends,
  one SHOULD be concerned
• A bad means should NOT be used to achieve a good
  end
• This ethical system dominates in the West

• If there is a conflict between means and ends,
  one SHOULD NOT be concerned
• A bad means CAN be used to achieve a good end
• This ethical system was dominant in the former
  USSR

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First and second ethical systems

• A saint is willing to compromise and has low
  self-esteem
• A hero is willing to compromise and has high
  self-esteem
• A philistine chooses confrontation and has low
  self-esteem
• A dissembler chooses confrontation and has high
  self-esteem

• A saint is willing to confront and has low
  self-esteem
• A hero is willing to confront and has high
  self-esteem
• A philistine chooses compromise and has low
  self-esteem
• A dissembler chooses compromise and has high
  self-esteem

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Lefebvres reflexive theory

• There are two systems of ethical cognition
• People are imprinted with one or the other
  ethical system at an early age
• Ones first response is always to act in accord
  with the imprinted ethical system
• However, one can learn the other ethical system
  and act in accord with it when one realizes that
  the imprinted system is not working

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Uses of Lefebvres theory

• Was used at the highest levels in both the US and
  the USSR during the collapse of the USSR to
  prevent misunderstandings
• Was NOT used during the break up of the former
  Yugoslavia
• People in Sarajevo said in 2004 that Lefebvres
  theory both explained why the war happened and
  why conflict remains
• Is currently being used in education and in
  psychotherapy in Russia

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Soross reflexive theory

• Soross theory is compatible with second order
  cybernetics and other systems sciences
• Soros uses little of the language of cybernetics
  and systems science
• Soross theory provides a link between second
  order cybernetics and economics, finance, and
  political science

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Reception of Soross work

• Soross theory is not well-known in the systems
  and cybernetics community
• Soross theory is not yet widely used by
  economists or finance professors, despite his
  success as a financial manager
• Soros has a participatory, not purely
  descriptive, theory of social systems

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Soros on the philosophy of science

• Soros rejects Poppers conception of the unity
  of method, the idea that all disciplines should
  use the same methods of inquiry as the natural
  sciences
• Soros says in social systems there are two
  processes observation and participation
• The natural sciences require only observation

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Two contextual ideas

• A general theory of the evolution of systems
• Ways of describing systems

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Types of societies

• Darwinian society new variety is the result of
  genetic drift
• Piagetian society organisms with complex brains
  have the ability to change their behavior within
  the lifetime of a single individual
• Polayni society people come together to create
  societies that regulate behavior
• Turing society some decision-making is
  delegated to programmed controllers

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Ways that disciplines describe social systems

• Variables physics, economics
• Events computer science, history
• Groups sociology, political science
• Ideas psychology, philosophy, cultural
  anthropology
• Interaction between ideas and events, a shoelace
  model

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How social systems change

• Study a social system (variables) and generate a
  reform proposal (idea)
• Persuade and organize people to support the idea
  (groups)
• Produce some change, for example pass a law
  (event)
• Study the effects of the legislation on the
  social system (variables)

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Advantages of using all four methods

• A richer description of the social system is
  produced
• Important considerations are less likely to be
  overlooked
• The theories and methods of more than one
  discipline are used

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Specific advantages

• The interests of more groups are likely to be
  included in the analysis
• The beliefs and values of the people involved,
  hence culture, are likely to be considered
• Actions to produce change (events) probably will
  be discussed
• The results of actions are more likely to be
  measured (variables)

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How reflexivity theory is different

• Classical scientific theories operate in the
  realm of VARIABLES and IDEAS
• Soross reflexivity theory describes the whole
  process of social change IDEAS, GROUPS, EVENTS,
  VARIABLES, IDEAS
• Reflexivity is the process of shifting back and
  forth between description and action

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• 
  Cognitive Function
• 
  
• Underlying
• trend of Prevailing
• stock price bias
• 
  Participating Function
• The two functions in
  reflexivity theory

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The efficient market hypothesis

• Economists assume that markets are efficient and
  that information is immediately reflected in
  market prices
• Soros says that markets are always biased in one
  direction or another
• Markets can influence the events they anticipate

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Equilibrium vs. reflexivity

• An increase in demand will lead to higher prices
  which will decrease demand
• A drop in supply will lead to a higher price
  which will increase supply

• For momentum investors rising price is a sign
  to buy, hence further increasing price
• A falling price will lead many investors to sell,
  thus further reducing price

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• Equilibrium Theory
  Reflexivity Theory
• -
  
  Stock
  Stock Demand
  
  price - Demand price
• 
  
  
• Equilibrium theory assumes negative
  feedback reflexivity theory observes positive
  feedback

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Examples in business and economics

• The conglomerate boom
• Real Estate Investment Trusts (REITs)
• The venture capital boom and collapse
• The credit cycle
• The currency market

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The conglomerate boom Events

• A high tech company with a high P/E ratio begins
  to diversify
• It buys consumer goods companies with high
  dividends but low P/E ratios
• As earnings improve, the price of the
  conglomerate rises
• A high stock price means greater ability to borrow

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The conglomerate boom(continued)

• The conglomerate borrows to buy more consumer
  goods companies
• Earnings per share continue to grow
• Investors eagerly buy more stock
• Eventually people realize that the character of
  the company has changed and a high P/E ratio is
  not justified

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The conglomerate boom Ideas

• Conventional view
• Rising earnings per share (EPS) mean the company
  has found the secret of good management

• Reflexive view
• Rising EPS is an indicator that the character of
  the company has changed, from high tech to
  consumer goods, and a high P/E ratio is no longer
  justified

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The conglomerate boom Groups

• Corporate managers who buy other companies
• Investors who believe in something new and
  foolproof
• Investors who use Reflexivity Theory

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• 
  Fraction of conglomerate
• that is in low
• Buying P/E
  businesses
• activity
• Ability to
  Earning per
• borrow share (EPS)
• Stock Investor
• price
  interest
• The conglomerate boom, variables

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• 
  Number of
• new ventures
• 
  
• Venture capital Sales of
  electrical
• funds equipment
• Competition
• -
• Profits
• -
• The venture capital boom

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• Amount of
• credit
• Lending Collateral Debt
• activity values
  service
• -
• Economic
• stimulus _
• The credit cycle

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• 
  

Value of Price of the

exports _
_
Price of
imports
_

Inflation Amount of
exports
Demand for
imports (due to large import
component in
exports) Domestic
wages Production
Reflexivity in the currency market
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Finance professors vs. Soros

• Most academic work in the field of finance
  involves building mathematical models
• Soros treats finance as a multi-person game
  involving human players, including himself
• Behavioral finance is a growing field, but it
  tends to focus on defining limits to the
  assumption that people are rational actors

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The process of selecting a portfolio

• Observation and experience
• Beliefs about future performances (Soros focuses
  here)
• Choice of portfolios (Markowitz focuses here)

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Equilibrium vs. Reflexivity

• Information becomes immediately available to
  everyone
• People are rational actors
• Economic systems go quickly to equilibrium

• People act on incomplete information
• People are influenced by their biases
• Social systems display boom and bust cycles

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Equilibrium vs. Reflexivity

• A theorist is outside the system observed
• Scientists should build theories using
  quantifiable variables
• Theories do not alter the system described

• Observers are part of the system observed
• Scientists should use a variety of descriptions
  of systems (e.g., ideas, groups, events,
  variables)
• Theories are a means to change the system
  described

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Equilibrium vs. Reflexivity

• Complete information
• Rationality
• Equilibrium

• Incomplete info.
• Bias
• Disequilibrium
• Gaps between perception and reality
• Boom and bust cycles

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Soros on political systems

• Look for gaps between perception and reality
• A large gap means the system is unstable
• When people realize that description and reality
  are far apart, legitimacy collapses
• For example, glasnost destroyed the legitimacy of
  the USSR Communist Party

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Misperceiving the USSR

• Soviet studies experts in the West assumed the
  convergence theory -- The West would adopt
  elements of a welfare state and the USSR would
  liberalize
• The West did adopt some elements of welfare
  states
• The USSR did not liberalize, as China is now
  doing, at least in its economy

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Soros looks for

• Rapid growth Positive feedback systems
  conglomerate boom, credit cycle, REITs, the high
  tech bubble
• Instability before collapse Gaps between
  perception and reality conglomerate boom, etc.,
  claims of USSR Communist Party, overextension of
  US power

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Soross contributions

• Soross theories expand the field of finance
  beyond mathematical models to anticipating the
  behavior of financial participants
• Soros offers an alternative to equilibrium theory
  as the foundation of economics
• Soros suggests a way to anticipate major
  political changes
• Soross reflexivity theory provides links between
  cybernetics and economics, finance, and political
  science

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Unifying epistemologies
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The cybernetics of science

NORMAL SCIENCE
The correspondence
Incommensurable principle
definitions

SCIENTIFIC REVOLUTION
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The Correspondence Principle

• Proposed by Niels Bohr when developing the
  quantum theory
• Any new theory should reduce to the old theory to
  which it corresponds for those cases in which the
  old theory is known to hold
• A new dimension is required

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  New philosophy of
science                
An Application of the Correspondence Principle  
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Toward a larger view

• At a dinner in Vienna in November 2005 Karl
  Mueller mentioned Heinz von Foersters 1971
  article Computing in the Semantic Domain
• Von Foerster described a triangle and labeled two
  sides syntactics and semantics
• Mueller wondered what the third side would be

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Creating a theory of epistemologies

• I suggested pragmatics
• Later in thinking about the triangle it occurred
  to me that the three sides corresponded to three
  points of view in the history of cybernetics
• The triangle suggested a way to unify previously
  competing epistemologies

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World
1
3
Description
Observer
2
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Syntactics Semantics

Pragmatics   Rc(W,D)
Rw(D,C)
Rd(W,C)   Determined by an
Determined by an Determined
by an organisms behavioral organisms
cognitive organisms
perceptive potential
potential
potential   Gives rise to concepts
Gives rise to concepts Gives rise
to concepts such as territory,
such as volition, action such as
niche, control, objects,
conceptions, and
instinct, reality and names
propositions
and consciousness
Von Foersters epistemological triangle  
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Epistemological triangle
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Another use of the triangle

• In 1991 I made a table comparing constructivist
  cybernetics, or the work of von Foerster, with
  that of Popper and Kuhn
• It seems to me that the three columns in that
  table also can be mapped onto the triangle
• This suggests that cybernetics constitutes an
  important third perspective in the philosophy of
  science

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Popper von Foerster Kuhn   A
normative view of A biological view
of A sociological view of epistemology
how epistemology how
epistemology how scientists should operate
the brain functions scientists in
fact operate Non-science vs. science
Realism vs. Steady
progress vs.
constructivism
revolutions   Solve the problem of
Include the observer Explain turmoil
in induction conjectures within the
domain of original records vs.
smooth and refutations
science progress
in textbooks   How science as a picture How
an individual How paradigms are of
reality is tested and constructs a
reality developed and then
replaced grows   Scientific knowledge
Ideas about knowledge Even data and
experiments exists independent of
should be rooted in are
interpreted human beings
neurophysiology   We can know what we
If people accept this Science is a
community know and do not know view,
they will be more activity
tolerant Table 3. Three philosophical positions
 
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Poppers three worlds

• World can be thought of as Poppers world one
• The observer is what Popper meant by world
  two
• Description can be thought of as Poppers
  world three

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Cautions

• The fact that ideas can be plausibly mapped onto
  a triangle carries no meaning per se
• However, an arrangement in the form of a diagram
  may reveal connections or missing pieces that had
  not been apparent before
• A graphical representation of ideas is simply a
  heuristic device

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Implications of the triangle

• A step toward a theory of epistemologies
• Shows how the three epistemologies are related
• Not choose one but rather use all three
• Shows the importance of von Foerster in
  comparison with Popper and Kuhn
• Shows clearly what each epistemology tends to
  neglect

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Implications of the triangle

• Second order cybernetics is redefined
• No longer a competing epistemology but rather a
  theory of epistemologies

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World
1
3
Description
Observer
2
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Overview of cybernetics

• Stages in the development of cybernetics
  engineering, biology, social systems
• Areas of application computer science and
  robotics, management, family therapy,
  epistemology, economics and political science
• Theoretical issues the nature of information,
  knowledge, adaptation, learning,
  self-organization, cognition, autonomy,
  understanding

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• A tutorial presented at the conference on
• Understanding Complex Systems
• Urbana, Illinois
• May 15, 2008